Summary

The welfare reform agenda in 2011-2017 from government will combine with unexpectedly austere economic conditions and associated cuts to the voluntary sector and legal aid. Over 100,000 existingWolverhamptonwelfare claims will be converted to a new super-benefit, many existing payment levels being reduced, and all capped at £500 per household per week.

A total sum of between £70million and £120million per year, every year, will be lost from the city economy by 2017. Large family households, headed by a lone parent, will face considerable pressures. The effects will be economically felt much wider than just the claimants’ households.

Recommendations – summarised

There are 12 itemised recommendations at the end of this paper. Principal themes amongst them are:

  • The need to see the welfare reform programme alongside other relevant economic factors, such as future financial fragility in the mortgaged sector
  • Creation of a working forecast of all the forthcoming factors, a “Wolverhamptonway”, which can better inform different agencies in planning for and reacting to events, and creating new mitigation plans
  • Identifying particularly vulnerable groups, such as workless lone parents with a large family in a heavily mortgaged property
  • Asking the private sector firms delivering the prevention agenda contracts to join in partnership work
  • Identifying which voluntary sector resources need defending
  • Obtaining research from theUSAexperience since 1996 on (perhaps unfamiliar) issues such as behaviour change and mental wellbeing

1.0 Background

Government is committed to transformative welfare reform, to change behaviour and deduct £18 billion from the cost within 4 years. A quarter ofUK public spending (13% of GDP) is today on welfare, although 40% relates to pensioners who have been comparatively protected. There is widespread public support and largely cross-party agreement. The familiar if complex benefits system redesigned by Norman Fowler in the mid 1980s, and variously adjusted by Labour administrations, will be transformed around these driving themes:

  • stronger work incentives (to make work pay and redefine claiming welfare as a temporary status)
  • responsible life choices (especially the size of family when claiming)
  • support for pensioners and those “genuinely” incapable of work, but less so for many other groups

New legislation has survived a contentious parliamentary passage and will soon replace a plethora of current mainstream benefits (such as Housing Benefit) with one simplified “super benefit” (Universal Credit, UC) starting in October 2013, for claimants who are in or out of work, or moving between. The benefits being abolished are currently supplied by Local Authorities and civil service agencies. This scale of change is ambitious under any circumstances, but set against a double dip recession, high unemployment, a weakened voluntary sector and lowered future growth forecasts, it is an unprecedented programme. InWolverhamptonchild poverty has risen from 17.9% in 2004 to 33.4% in 2011. In the USA, somewhat similar policy changes, starting in 1996, have cut welfare claims by 58%, but in doing so created sub cultures of people who simply fell out of the system, including a category described as “floundering mothers” who cannot keep in work but are simultaneously debarred from claiming state aid, resulting in controversial policy debates about the many children affected by such complex household consequences.

2.0 Current Position

a)    Welfare change issues only

[Indicative figures in this report will be rechecked in forthcoming weeks]. In Wolverhampton there are well over 100,000 live claims to be changed into UC over a 4 year period: Housing Benefit (25,869), Income based JSA (12,108) other out of work benefits (29,700), plus Working Tax Credit and Child Tax Credit are received by 65% of Wolverhampton’s families. Each year even more customers start and stop claims. UC will be applied for by digital default (online) and paid one month in arrears to a bank account. It will be administered by a remote national agency rather than local offices. Direct payments to landlords will cease, meaning the concept of an “earned monthly wage”, with all the responsibilities for the household, is created. In a recent DWP guide it was stated that, until they get a job, a claimant’s job is to get a job.

Because of the scale of the changes there will be 4 years where de facto 3 different welfare benefits systems co-exist: those already on UC, those still on the legacy benefits package, and those waves of claimants in transition. Alongside this is a parallel change from Disability Living Allowance (DLA) into the newly stringent Personal Independence Payment. This will require a fresh claim for all of the existing 15,700 disabled DLA claimants inWolverhampton. Cuts were made to Housing Benefit in 2011, and more are now occurring. There is also a new Benefit Cap of £500 per week per household.

The Stoke on Trent municipal information team are suggesting a loss to that city of £106.4million a year, every year. A simplistic per capita assumption aboutWolverhampton’s population compared to the national cuts sum produces a not dissimilar range.

What are the wider consequences of these changes? Housing Benefit (HB) is in reality a rent subsidy which funds landlords. InWolverhamptonthe housing supply is 7% private sector landlords and 25% the ALMO. Rent arrears are expected to grow as some claimants cannot or will not make up the shortfalls caused by HB reductions. The amount of housing related enquiries coming to the CAB inWolverhamptonhas already increased from 7% in 2008 to 18% in 2011.

The Benefit Cap is a novel fixed ceiling on all household welfare income, irrespective of family size. Early government estimates predict circa 70,000 households will be affected at an average loss of £83 weekly from April 2013. 56% are in the private rented sector, 69% have more than 3 children and 52% are lone parents. The Black Countryhas an unexpectedly high volume of such households and preliminary letters are already going to them. £83/week is £4312 a year. DWP staff work to “vulnerability” triggers but need claimants to engage, and are not knowledgeable about housing stock quality or local rent issues. Initial claimant responses are apparently defeatist. If 500 families lose the average modelled sum, this equates to just over £2million in Wolverhampton.

b)   Economic background issues

A fair wind does not exist for welfare reform:

  • youth unemployment is high and inadequate numbers of good jobs exist to move claimants into
  • flat wages are being eroded because of rising costs of living
  • fuel and food inflation is especially high
  • increasingly bold marketing of “pay day loans” at extortionate interest rates (4000% APR from one popular mainstream company) are flourishing, and local CAB evidence suggests a growing negative trend
  • Enquiries at Wolverhampton CAB for “threatened homelessness” have continued to rise year on year since 2008: 141, 286, 625, 743, and these are before the welfare cuts have really started

Other more currently favourable phenomena will drop away:

  • there is a small temporary effect of PPI claims (for mis-sold payment protection insurance) coming back to local people, possibly £2million pa
  • the standard variable rate of mortgages has been held low for 3 years, offering up to £300 a month interest relief on an average priced Wolverhampton fully mortgaged property of c£126,000 – this could end in 2013/14, and if only 10,000 properties were affected this would still drain £36million pa from the city. 60% of local property is owner occupied
  • cuts of freely available discrimination casework in 2012 and to legal aid in January 2013 will remove all publicly funded assistance to low income households in the subjects of discrimination, employment and welfare benefits law, and most debt advice too; the cuts have been opposed because £1 spent on legal aid is reliably estimated to save at least £4 to the tax payer. This means 1,400 fewer cases to be run inWolverhampton(and 12 key jobs lost at the CAB), or about £1.2million more cost to the local public purse.

And a particular concern lurks concerning owner occupied housing stock in future and the number of children in households accepted as homeless:

  • it is widely forecast that a rush of mortgage repossessions will occur at the end of the downturn, as the national economy and housing market recovers, and interest rates rise, but unemployment lingers locally. Repossession figures for Wolverhampton postcodes to date for 2007 to 2010 inclusive are 535, 655, 320 and 285. This shows how effective the post credit crunch support responses have been locally (the MRS, CAB and City Council activity), plus mortgage lenders not viewing repossession as attractive in a depressed market, and the protective effect of the low Bank of England led SVR. In 2012 the CAB continues to advise over 500 households annually with serious mortgage debt, and reschedules most onto the low SVR. Once that SVR changes, all of these recently stabilised cases unravel afresh, and simultaneously
  • recent figures from Housing Options inWolverhamptonshow that of 175 families accepted as homeless last year, 473 children were involved

c)    Prevention services

One of the hopes of the government agenda is a real appetite for prevention work, and the use of bank levy money (“polluter pays”) to fund a national debt advice scheme (rather than tax payer income) is a long overdue reform. The heavily funded Work Programme and Troubled Families schemes also seek to combine to reduce obstacles to job hunters or families on welfare and the new Money Advice Service offers basic guidance on financial planning and awareness.

As things stand these new nationally tendered contracts have all been won forWolverhamptonby private contractors such as EOS, Pertemps, In Training and A4e. Despite early meetings these firms are not currently participating in the established partnership frameworks, for reasons which are as yet unclear.

d)   Big Society

Another government ambition was to stimulate more local and informal sources of micro help and mutual support for those in communities. Unfortunately, due largely to other central government cuts, all of the recognised voluntary agencies in Wolverhampton able to help with the welfare agenda are today in far worse fettle than they were in 2010. The CAB has lost 24% of its funding and 21 (a third) of its paid staff in 15 months, due to 4 national schemes ending. It will have to downscale its offers at Bilston and Low Hill unless replacement resources for legal aid are found. The WVSC has suffered a similar range of cuts. The Asian womens’ advice agency AWAAZ closed in 2011, and the veteran All Saints local agency (the Haque Centre) closed in 2009/10. Only charitable free food outlets appear to be blossoming in this policy area, which are a genuinely welcome practical phenomenon, but treat the symptoms of need, not the causes.

e)  Summary of current position and key concerns

The scale of the welfare reforms, set against an austere economic outlook, as yet unproven prevention services, and rapidly deteriorating traditional sources of assistance, suggest that something in the region of £70million – £120million of year on year combined welfare cuts and economic strains could be felt in theWolverhamptoneconomy up to 2017. Amongst these are some emerging and especially local vulnerability issues:

  • lone parents, usually women, with low skills in larger households, especially with younger children
  • claimants for whom digital benefit applications and onerous conditionality obligations (90 minutes travelling to work) are problematic
  • those who are unaware of or do not access support services and are not flagged as vulnerable
  • those (from many backgrounds) who may become newly mentally unwell under the storm of negative pressures (such as spiralling debts and personal isolation)
  • some younger adults from Black and Mixed Black/White backgrounds already consistently show up as exceptionally vulnerable to personal indebtedness in CAB data
  • it is possible to forecast some families who will be exceptional losers under the changes: a workless lone parent with over 3 children in a heavily mortgaged property on the SVR could face both the worst of welfare cuts and the worst of the economic situation, and find less local support than ever before

3.0 Way forward

In a nutshell, it’s all going to happen. The questions are therefore not really about if and when, but exactly what tangible effects will occur in our city. Based on theUSAexperience, current government timetables and unavoidable forecastedUKfactors (like the national economic situation) the following expectations are presumed:

  • the majority of circa 100,000+ affected Wolverhampton claims (from a lesser number of local people) will adequately convert to the new welfare era, some less comfortably than others, although a higher proportion of rent arrears cases will result as landlords seek to reclaim unpaid rent
  • Wolverhamptonwill cope slightly less well than many other areas, due to longstanding local issues (the kinds of issues that have revealed a vulnerability to child poverty)
  • some households will lose over £4000pa via the Benefits Cap, many being lone parents and/or with larger families
  • less will be spent in the local shops and economy
  • from 2013/14 there could well be a rise in repossessions and more households presenting as homeless
  • a large number of extra enquiries will be brought to advice agencies, which will have less capacity to run legal casework
  • stress and mental wellbeing issues will increase to some degree across many groups
  • a hard to quantify rise in destitution and homelessness will occur for some vulnerable groups
  • a few harrowing cases will appear in the media, and increased lobbies will emerge from campaign and faith groups, but overall public support and political agreement for welfare reform remains strong
  • pockets of small-scale protest and anger may occur, for instance bailiffs at work being rebuked by local people
  • modest re-compaction of households, principally young adult people moving “back home”
  • the Local Authority will have greater overall responsibilities but little local control over the private sector prevention service contractors
  • child poverty is likely to creep higher, at least in the medium term, and safeguarding concerns may remain high
  • some increased disrepair as landlords’ income wanes and some mortgaged landlords are themselves repossessed, cascading unwitting tenants into homelessness

4.0 Recommendations – specific

1     Assess the total loss of income to the city from all causes until 2017

2     Estimate where these losses will have an affect (ie by neighbourhood, or retail sector)

3     Create an overall narrative for planning purposes, a “Wolverhamptonway”, that is broader than currently emerging agency by agency knowledge

4     Arrange for DWP officers to liaise on the Benefit Cap with LA officers who possess intelligence on neighbourhoods, vulnerability and housing stock/rent levels

5     Seek defined partnership engagement from the private firms delivering new prevention contracts

6     Consider a standing reference group for multi-agency practitioner level officers to co-ordinate intelligence flows, including soups kitchens, landlords and advice agencies alongside senior officers

7     Access research evidence on theUSAchanges and mental wellbeing effects as “behaviour change” is exerted on populations

8     Scope popular “living on a budget” skills options – repairing your home, cooking for a family – with a view to social media cascading

9     Consider the new “local social fund” being linked to social prevention systems

10  Discuss an extended local Mortgage Rescue Scheme facility, unless a national scheme is made available

11  Identify key Big Society agencies/functions that must be protected

12  Prepare some evidence-based and effective new schemes to mitigate against vulnerable groups failing to seek advice and support, for example the “advice in maternity pathway” pilot

Jeremy Vanes

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